Correlation Between Lloyds Banking and Snap-on Incorporated
Can any of the company-specific risk be diversified away by investing in both Lloyds Banking and Snap-on Incorporated at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Lloyds Banking and Snap-on Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lloyds Banking Group and Snap on Incorporated, you can compare the effects of market volatilities on Lloyds Banking and Snap-on Incorporated and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Lloyds Banking with a short position of Snap-on Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lloyds Banking and Snap-on Incorporated.
Diversification Opportunities for Lloyds Banking and Snap-on Incorporated
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Lloyds and Snap-on is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Lloyds Banking Group and Snap on Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snap-on Incorporated and Lloyds Banking is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Lloyds Banking Group are associated (or correlated) with Snap-on Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snap-on Incorporated has no effect on the direction of Lloyds Banking i.e., Lloyds Banking and Snap-on Incorporated go up and down completely randomly.
Pair Corralation between Lloyds Banking and Snap-on Incorporated
Assuming the 90 days trading horizon Lloyds Banking is expected to generate 4.63 times less return on investment than Snap-on Incorporated. In addition to that, Lloyds Banking is 1.31 times more volatile than Snap on Incorporated. It trades about 0.06 of its total potential returns per unit of risk. Snap on Incorporated is currently generating about 0.36 per unit of volatility. If you would invest 30,474 in Snap on Incorporated on September 2, 2024 and sell it today you would earn a total of 4,396 from holding Snap on Incorporated or generate 14.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lloyds Banking Group vs. Snap on Incorporated
Performance |
| Timeline |
| Lloyds Banking Group |
| Snap-on Incorporated |
Lloyds Banking and Snap-on Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lloyds Banking and Snap-on Incorporated
The main advantage of trading using opposite Lloyds Banking and Snap-on Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lloyds Banking position performs unexpectedly, Snap-on Incorporated can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Snap-on Incorporated will offset losses from the drop in Snap-on Incorporated's long position.| Lloyds Banking vs. Intesa Sanpaolo SpA | Lloyds Banking vs. UniCredit SpA | Lloyds Banking vs. Crdit Agricole SA |
| Snap-on Incorporated vs. Brockhaus Capital Management | Snap-on Incorporated vs. Darden Restaurants | Snap-on Incorporated vs. Digilife Technologies Limited | Snap-on Incorporated vs. BJs Restaurants |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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